Asian example perfectly suited to Africa

African Business (PDF)

One of the most obvious ways of adding value to agricultural production is by processing that output within Africa.

Pineapples can be canned for export and sugar can be refined locally but too much produce is exported in a raw state. The lack of manufacturing and processing in Africa is not restricted to agribusiness. Sub-Saharan Africa accounts for a miserly 1% of global manufacturing output.South Africa has the continent’s most developed food manufacturing and processing sector, while its established grain and sugar sectors look set to grow over the next few years. Pretoria is seeking to promote manufacturing and processing exports in all sectors. In April, the Ports Regulator of South Africa imposed a 43.2% reduction in tariffs on the export of full containers in order to aid exporters.

Other governments are also encouraging investment. In July, Blumberg Grain signed a memorandum of understanding with the government of Ghana regarding the development of a processing plant and export hub in the north of Ghana.

US firm Blumberg intends to employ about 1,000 people at the new facility. The government hopes that the scheme will reduce crop losses and encourage agricultural investment in the north of the country by providing a ready market for production, although the hub will seek to attract supplies from the wider West African region.

Blumberg plans to invest in local, privately owned farms, where it can introduce high-yield farming technology. A new Agriculture and Farming Institute will also be opened at the selected location, which has yet to be confirmed, in conjunction with Ghana’s Food and Agriculture Ministry, Iowa State University and several non-governmental organisations.

In July, the African Development Bank (AfDB) agreed to give an $80m loan to the Olam Africa Investment Programme (OAIP) to fund palm oil and wheat processing projects in four countries: Cameroon, Ghana, Mozambique and Senegal. OAIP is owned by the OLAM Group, a global integrated supply chain manager. (See story on page 30.) It is worth noting that the loan is to be made in the local currencies of the countries concerned, which reflects slowly growing confidence in African currencies.

OAIP estimates that the money will be used to provide 600,000 tonnes a year of additional food processing capacity. In a statement, the AfDB reported: “It is expected to enhance the regional food supply chain and act as a catalyst to support job creation and improve sustainability of agribusiness sector, thereby enhancing food security on the continent.”

Almost all agencies agree that public-private partnerships (PPPs) are the way ahead for agribusiness and agricultural development. A combination of public and private investment and control is already the dominant model in many supposedly commercial sectors in North America, Europe and Japan, where subsidies on production are common and governments help to fund R&D programmes.

While advanced seeds, fertilisers and other components have been developed in other parts of the world, environmental conditions vary from location to location and so it is important that situation specific technology is deployed. Again, it is generally helpful if it is developed locally. In particular, Africa has a number of subsistence crops that form part of the staple diet of many people but which have rarely been developed as significant cash crops. Given the right support, however, they can be adapted to generate more income.

To take one example, the Root and Tuber Improvement Programme was launched by the International Fund for Agricultural Development in Ghana in 1999. Focusing on cassava, it developed strains that offered higher yields, faster growth and improved disease resistance. They have now entered mainstream agriculture and production levels have increased, enabling small-scale farmers to make a profit.

Apart from providing a local staple, cassava is now exported in greater volumes, used as animal feed, turned into glue and supplied as an industrial starch. The same strategy is being followed with regard to rice, as the African continent currently imports $3.5bn worth of rice a year. The New Rice for Africa (NERICA rice), which has been developed specifically for cultivation in arid areas, is now being grown in Sierra Leone and Guinea.

More practicality, less nit-picking

Most African food and agricultural markets are fragmented along local or national lines, so that the same crops travel along the same supply chain each year. Greater integration could enable small scale producers to gain higher prices for their crops.

In July, the United Nations Conference on Trade and Development (UNCTAD) recommended that sub-Saharan Africa should seek to emulate Southeast Asia in terms of promoting agricultural processing and R&D. The basis of agricultural development in the region was regional cooperation, with the Asian Development Bank helping to fund many projects. Countries sought to share facilities and cross-border transport links were improved. In addition, poorer countries in the region, such as Laos, were given extra financial support to help food manufacturing companies in their own country.

Taffere Tesfachew, the UNCTAD director for Africa, says: “What we found interesting was that it went beyond trade to include a common industrial policy, common investment policy and pulled up the poorest countries. We thought it was something African countries can learn from.”

It is easy to understand why the countries of the Mekong Delta were chosen as a model for Africa, as the focus of its agricultural development model was precisely what the African continent lacks. Just 17% of all trade in food by African countries involves another African country. By contrast, most Asian, European and North American trade in food involves another country in the same region.

The UNCTAD report states: “Success in boosting intra-African trade will depend largely on the extent to which countries are able to foster entrepreneurship and build supply capacity, establish a credible mechanism for dialogue between the state and business, build regional value chains, implement existing regional trade agreements, rethink their approach to regional integration, and maintain peace and security.”

David Kruyer of Concargo Global Logistics agrees: “There needs to be an ongoing drive to foster total regional economic integration in Africa. An imbalance in inter regional trade between the different countries due to the lack of manufacturing and production facilities also impacts negatively on transport costs.”

Yet African governments have been reluctant to reduce trade barriers. There are eight regional trade blocs on the continent, each with different rules and regulations on cross-border trade in agricultural produce and processed food. As a result, there is very little trade between West and East Africa, for example, so that Kenyan farmers would not consider marketing their exports in Nigeria but would target South Korea or the UK. In addition, new seed and fertiliser varieties are tested for up to three years before being licensed by individual African countries. Yet even when proved successful in one country, other governments usually begin the whole process again before sanctioning use. This is a waste of valuable time and money. What is needed is more hard-headed practicality, as the Asians have demonstrated, and less bureaucratic nit-picking.

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